Wage Stagnation, Two Views

Harold Meyerson, writing for The Washington Post, makes an interesting argument about wage stagnation that I've not seen previously. He claims corporate funds that once would have raised wages now are being distributed to stockholders, some as dividends, but mostly via buying back stock.

Stock buy-back raises the price of still-held shares in two ways: first, it creates market demand for the firm's shares. Second, it reduces supply of said shares. Increasing demand and reducing supply are both standard micro-economic ways to increase prices.

As Meyerson notes, stocks are being traded more frequently than was once the case. Profits are thus harvested via capital gains, taxed at a lower rate than dividend income.

----------o--0--o----------

I suggest another possible cause for wage stagnation: skyrocketing healthcare costs. It is likely that money is being diverted from take-home pay to healthcare premiums. I'd like to see whether total cost-to-employ has risen, while wages have not, I predict it could be a factor.